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Thursday, July 31, 2014

It
is no crime to be ignorant of economics, which is, after all, a
specialized discipline and one that most people consider to be a
“dismal science.” But it is totally irresponsible to have a loud
and vociferous opinion on economic subjects while remaining in this
state of ignorance.

This
maxim applies even more so
for academics, who, unfortunately, oftentimes mistakenly presume that
possessing superior knowledge in their respective fields of expertise
necessarily means that they possess superior knowledge over ALL
matters. Perhaps due to vanity, academics tend to suppose
that all of their prejudices from A to Z hold value for no other
reason than they are academics.

Unfortunately,
many academics outside the field of economics who possess little
to no knowledge about even the basic fundamentals of economics
do not hesitate to make sweeping pronouncements about the subject. A
good example of this is one Robert J. Fouser, who is an associate
professor of Korean language education at Seoul National University.

Now
I have never met Professor Fouser and I have never spoken to him.
All I know about him is that he is a Korean language professor at
Seoul National University. Therefore, since all I know about him is
his occupation, I will give him the benefit of the doubt and assume
that he is an excellent linguist and an expert in the Korean
language. In fact, I will go further and even assume that he is a
gentleman whose only wish is for everyone in the world to be happy.
However, that does not mean that his opinions about anything outside
of his field of expertise carry any more weight than the opinions of
anyone else.

That
did not stop Professor Fouser from pontificating about the state of
the Korean economy or the need for “economic democracy” in his
editorial
in The
Korea Herald.

He
began by saying:

Talking
to ordinary people is the best way to check the pulse of a nation.
Last week, I was lucky to be able to take the pulse of Korea through
long talks with friends who also happen to be ordinary people. The
talks paint a picture of a nation deeply troubled by worry and
self-doubt. Above all, the overwhelming message is that the Korean
dream is slipping away.

What
sorts of criteria must people meet in order to be considered “an
ordinary person?” He does not say. Furthermore, assuming that
“pulse of Korea” means “the overall mood of the Korean people,”
then is talking to a few friends all that is needed to discover the
mood of this entire nation? If that's the case, I think all those
people at Pew Research Center
should quit their jobs and find more meaningful employment elsewhere.

He
also adds rhetorical flair when he says, “Opportunity comes through
reforms that break down barriers and help create fair competition.”

Just
what does “fair” mean exactly? The
fact of the matter is that there is no objective standard of
“fairness.” What is “fair” tends to be strictly
in the eye of the beholder. So what does Professor Fouser mean when
he says “fair?” I guess we will never know. But even if we did
get to learn what he thinks the word should mean, would it matter? I
think not.

Just
like so many unemployed hipsters who think that they have “figured
out” what capitalism is, Professor Fouser also felt confident
enough to give his diagnosis when he said:

The
essential problem is that capitalism, particularly the variety that
developed in Korea, relies on expanding markets for its prosperity.

Where
have I heard that from before? Oh right, it was Karl Marx who said
it first
in the Communist Manifesto when he said:

The
need of a constantly expanding market for its products chases the
bourgeoisie over the entire surface of the globe. It must nestle
everywhere, settle everywhere, establish connexions everywhere.

You'd think that the Ghostbusters would have gotten around to taking care of the ghost of Karl Marx by now.Image Source

Never
mind that capitalism is not actually a conscious living being but
merely an idea; an economic system which is defined by the private
ownership of property. Never mind that capitalism is merely an
economic system that allows people the opportunity to pursue their
desire to seek greater prosperity, which is not the same as a
need to seek greater prosperity. Never mind that prosperity
can be had even without “expanding” to new markets abroad. As
long as there are any human needs that are unsatisfied, there is no
limit to do business, even within Korea's own humble market.

But
why try to explain all that when he already knows what “the
essential problem of capitalism” really is?

Then
Professor Fouser went on to say:

A
relatively small number of nations with technological advantages
monopolized high-value goods. These nations boomed because they had
a growing consumer and production base at home and competitive
advantages in exports... Japan, once known for its massive trade
surpluses, has seen a trade deficit for 24 months in a row since June
2012.

What
does it mean to monopolize something? A
monopoly occurs when a single business entity owns all the market for
a given product or service. By definition, there can be no other
competitive agent. When was the last time any country in the world
had a monopoly on any good? I will await patiently for that answer.

Next,
is having a growing consumer and production base and competitive
advantages in exports all that are needed to get rich? They are
certainly important, but they are not the be-all
and end-all of gaining riches. If they
were, India would be one of the richest countries in the world, and
Switzerland would be one of the poorest! Professor Fouser did not
mention a single word about other necessary qualifications that a
country has to meet in order to break away from the chains of poverty
such as the supremacy of the rule of law, the reliability of
institutions, low levels of government corruption, the importance of
culture, work ethic, education levels, women's rights, the effects of
war and peace, or history.

Even
if he had mentioned all of that, he would have only begun to scratch
the surface about how some societies get rich while others remain
poor. But why worry about such fine details? It's all about the Big
Picture, I'm sure.

It's like as though no one in the history of the world has ever attempted to study this subject before!Image Source

And
just what the hell is wrong with trade deficits? If trade surpluses
are so great, seeing how the United States ran a trade surplus in
nine out of the ten years of the Great Depression,
the 1930s should have been a ten-year long party for Americans!

Conventional
wisdom seems to go like this – The Japanese economy's performance
has been lackadaisical.
Japan has had trade deficits for twenty-four months in a row.
Therefore, trade deficits must be bad.

Then,
using that same logic, seeing how the United States ran a trade
surplus for nine out of ten years during the Great Depression, is it
correct to say that trade surpluses must be bad?

Neither
a trade deficit nor a trade surplus means a damned thing when it
comes to the overall health of an economy. There are many reasons,
some of them known and others unknown, as to why an economy
flourishes or flounders. Trade deficits and trade surpluses are not
one of them. This may be difficult to understand for many people
but, believe it or not, economies are far too complex to draw
simplistic causal connections.

This should be your level of skepticism when someone claims to have a simple solution to fix the economy.Image Source

So,
after having used shoddy research methods, normative statements that
can mean anything depending on the reader, and one economic fallacy
after another, Professor Fouser finally says:

Focusing
on inequality is the first step toward restoring the Korean dream.
To do so, Korea needs to move beyond the din of petty politics and
revive the national discussion on “economic democracy.”

At
this point, I ought to explain how the entire concept of “income
distribution” is tendentious; that the concept is flawed from the
very start because it takes the existence of wealth for granted, that
wealth exists somehow – never mind how it came into existence –
meaning that the only thing that people need to be concerned about is
that it has to be distributed and apportioned among everyone. Never
mind who is going to do the apportioning or how or for whom and damn
the morals and damn the consequences!

But
nitpicking the arguments that he stated alone were exhausting enough
as it was.

I'll
say it again. I'm sure that Professor Fouser is an excellent
linguist and an expert in the Korean language and a gentleman of
noble intent. But perhaps it might be prudent for him (and others)
to stick to what he is good at and leave the subject of economics to
economists.

Tuesday, July 29, 2014

As
stated in my previous
post,
both Saenuri lawmakers as well as the Ministry of Strategy andFinance
wants to see “adjustments” made to the value of the Won. It's
their way of saying that they want to see the value of the currency
depreciate.

Well,
why does a currency appreciate in the first place? Simply put, it
occurs because the currency is in demand. For example, if a country
exports a lot, the demand for that currency will go up. There are,
of course, other reasons, too, such as increasing (or at least
stable) interest rates, an increase in per capital income, a stable
government, etc.

So,
the value of the Won has been relatively quite high over the past few months.

However,
a few really big things have been happening in the world over the
past few years that are beyond the Korean government's control.
Since 2008, the United States government has injected into its
economy close to US$5
trillionin
stimulus money while keeping interest rates atnearly
zero percentand
having the world's largest debt, which has devalued the Dollar
somewhat. The Japanese government recently decided todepreciate
the Yen.
And
with several European economies having gone belly up over the past
few years (seePIIGS
economies), there have been calls
by several European governments to depreciate the Euro,
and the Euro is expected
to depreciateagainst
the Dollar in the next few months.

Congratulations! You read through that borefest and did't get distracted by porn! Here's your reward! Look at those puppies! LOOK! AT! THEM!Image Source

Everyone
is depreciating (or wants to depreciate) their own currencies. It's
why Saenuri lawmaker Representative Kim Moo-seongsaid,“There
is a Currency War going on in the world right now.”

So
why do governments want to depreciate their own currencies? The main
reason why any government would want to depreciate its own currency
is for the sake of becoming “more competitive.” With one country
after another going through some form of economic contraction or
another, governments are trying to increase exports. And the best
way to increase exports is by making sure to sell at a cheaper price
than other countries. And if you can't make the product cheaper, you
can make the money worth a little less.

(Side
note: If depreciating a currency makes a country more competitive,
shouldn't Zimbabwe be the richest country in the world?)

The
problem with depreciation is that it's like having a shot of whiskey.
Everyone who is calling for their currencies to depreciate are
basically saying, "A shot would really perk me up right now."

Well,
it's true. Having a shot of whiskey will definitely perk people up.
But the problem with having that shot of whiskey, as any whiskey
aficionado will tell you, is that you can never have just one shot of
whiskey... If there is any among you who is thinking that this
analogy does not work because you yourself do not enjoy whiskey, YOU
SHUT UP AND DIE, YOU ABOMINATION!

The
fact of the matter is that we live in an interlinked global economy
and in such an economy, currencies
don't rise or fall in a vacuum. For
example, one complaint that the United States always raises against
China is the latter's monetary policy, which has kept the Chinese
currency, the yuan, artificially low. The Chinese government has
pursued such a policy because it ensured that Chinese goods remain
cheap, which is one of the big reasons for the trade imbalance
between the United States and China. That has provided a steep
incentive for the United States to retaliate by lowering its currency
as well, which in effect, it has done.

Countries
around the world often see currency wars as a zero-sum game. In
reality, it is really a lose-lose game for everyone. For example,
unstable exchange rates candeter
international investment
and slow economic recovery. And of course, currency wars can have
secondary political effects as well. Though this may admittedly be a
case of post
hoc ergo propter hoc,
when was the last time that the American and Chinese governments have
ever seen eye-to-eye on anything?

So
going back to the whiskey analogy, it turns out that people aren't
just slamming down whiskey shots just to perk up a bit. They are
actually in a drinking competition that's being hosted by Delta Tau
Chi (Who got that reference, huh?) and everyone's trying to out-drink
each other. And the drunker they get, the more irritable the
contestants are getting.

Now
it may be an incontestable fact that Jack Daniel's is the best
goddamned drink on this side of the Milky Way Galaxy but it is also
true that spending a bit too much time with him usually gets people
into all manners of trouble.

“But,
John, aren't you by definition saying that as long as people slam
down their shots of sweet, sweet Jack Daniel's nectar in moderation,
it will perk people up and they won't ever have to worry about
getting arrested for indecent exposure in a public park in the
presence of four minors and their very angry mothers and one dad?
Then isn't it also true that depreciating a currency in moderation
can actually work to stimulate an economy, too?”

Well,
firstly that's a terrific question, hypothetical reader who is
actually really me (and no, it is not sad at all that I am having a
conversation with myself).

The
answer to the question as to whether or not depreciating
a currency works to stimulate an economy is this – Yes and no.

Depreciation
works
if prices and wages don't adjust to the new economic conditions. For
example, let's say that you're a citizen of Country A and you make
A$1,000 a month. Now it so happens that your country trades with
Country B. It also so happens that in order to improve economic
conditions, your country's government decides to depreciate your
currency. So, in the past, if your A$1,000 was worth B$1,000, now
your A$1000 is only worth B$500.

In
this new situation, citizens from Country B can afford to buy more of
your things. Now if the prices of your goods and your wages remain
the same, depreciation will absolutely work as those suckers from
Country B (who conveniently aren't depreciating their own currency
for no other reason than to let this hypothetical example work;
ceteris paribus,
bitch!) stops buying their own stuff and continues to buy your stuff!
But it will only work temporarily.

It
will only work temporarily because eventually, inflation always
catches up to depreciation. Let me explain. When the value of your
country's currency is artificially depreciated, other people's demand
for your goods will go up. And one of the laws of supply and demand
is that if demand goes up, so does price.

What
that means specifically for you is that your monthly bills are going
to come out higher than you're used to. And when prices go up and
enough people get upset about it (Hello, labor unions!) it's not long
before wages also go up until it catches up with the price and then
some.

So,
just like slamming down shot after shot after shot of Jack Daniel's,
it's not a matter of whether or not a little currency depreciation
will perk you up. It's a matter of how long you get to have fun
before you wake up the next day with no memory of why you thought it
was a great idea to drunkenly text your ex-girlfriend who has been
happily married for the past three years that you still love her
thirty-eight times while lying next to a one-legged hooker. Not to
mention the massive hangover.

But
that's where democratically elected governments come in. Every
politician wants to get elected and they want to stay elected. So
whenever the hangover is about to set it, they have good news for us
partiers! Just a little hair of the dog and you're good to party
again like it's 1999!

That
hair of the dog usually includes more currency depreciation and more
economic stimulus packages. But as anyone who has ever had a
destructive love affair with Jack Daniel's can tell you, after a
while, even the hair of the dog can't perk you up. You will also
need at least a pack of Marlboro’s (Hello, lowered interest
rates!) and if it's bad enough, Adderall (Hello, quantitative
easing!).

What
you slowly begin to realize, however, is that your body is silently
pleading for you to stop. You need solid food. You need water. And
you need sleep. You need time to recover. You realize that your
stress levels are getting higher, your brain function is slowing
down, and all that booze and drugs is burning a hole in your checking
account, which means that you have to call mom and dad to ask for
more money.

Now
you're in a rut. To reduce your stress levels, you need money so
that you can pay your rent and not get evicted; but to do that, you
need to call mom and dad to ask for more money and explain to them
how you misspent their money (that they had to take out in loans from
Repos-R-Us Bank) on booze and drugs instead of studying in the
library to get that 4.0 GPA that you swore to them that you would get
if they would only just bite the bullet and send you to this
overpriced Ivy League college campus.

Now
you're having second thoughts. Telling them about all those stupid
things you did would disappoint them, break their hearts, make them
lose faith in you, anger them, and hurt them. Worse yet, they might
stop sending you money and force you to move back in to your old
bedroom and get a job at the local paper mill where the highlight of
your day will be watching reruns of “The Bold and the Beautiful”
on your union-approved hour-long lunch break with those other
middle-aged factory lifers who don't like yer kind with all that
mumbo-jumbo book learnin'.

This
sort of thing also happens in economies and there's a name for it –
stagflation.
And it's no fun. If you don't believe me, ask Jimmy
Carter.

Before
you know it, you've become a junkie and have resorted to stealing
(Hello, Taxes
Against Corporate Surplus Profits!).So
what's the real solution? Well, unfortunately, the real solution is
economic as much as it is political. Do you trust the government to
have enough discipline to depreciate the currency only when it is
absolutely necessary, and not do it any time it is expedient? Do you
trust that the stupid college kid really has the willpower to go to
only one Delta Tau Chi-sponsored Drinkathon and then spend the rest
of his time to make sure that he graduates with a summa cum laude?
Or do you think there has to be strong rules and strict morals?

Sunday, July 27, 2014

I
realize that I said that my next post was going to be my second
installment of “Super Fun Economic Review” about the Korean
government's increasing hints about depreciating the value of the
Won.

Rest
assured, that post is coming. However, it's taking longer than I had
anticipated. In the meantime, I wanted to upload this post.

Just
today, I read an article
in The Diplomat about Korea's refusal to liberalize its
domestic rice market to international trade. A few days ago, I also
read a very impressive article
about this same topic that was written by Eric
Deok-jin Song who works over at the Korea-based libertarian think
tank, Center for Free Enterprise
(자유경제원).

As the article was written only in Korean, however, I have taken the
liberty of translating the article into English.

I
think that this is a good time to state that I am not affiliated with
the Center for Free Enterprise in any way whatsoever. Furthermore, any mistakes
in the translation are mine and mine alone.

The first two picture files in this post were from the original post, but I have added the other pictures myself.

Is
rice life? How much longer will the taxpayers' money be spent to
subsidize rice? Rice has already been losing its status as the
country's staple food. From 1995 to 2014 whereas rice production
increased about 10%, the amount of rice that has been imported has
increased 8 fold. The only two countries in the world that have not
opened up their rice markets are Korea and the Philippines.
Continuing to subsidize rice is a waste of the taxpayers' money.

The white signboard that the man is carrying reads "쌀은 생명이다," which means "Rice is Life."Image Source

The
Ministry for Food, Agriculture, Forestry and Livestock says, “For
the future of the rice market, the best decision that we have made
was to begin to import rice, but to impose tariffs on imported rice.”

With
the government on one hand that says that the opening up the rice
market can no longer be delayed and opposing farmers on the other
hand claiming that such a move would cause irreversible harm, the
differences between the two sides are sharply contrasted. It should
be noted that Korea made a promise to the international community to
open up its rice market in the Uruguay
Round of multilateral trade talks
in 1994.

By claiming that rice is unique to Koreans, the
Korean rice market has received “preferential treatment” and has
been waived from opening up the market at great cost. What was the
great cost? For failing to open up the market, Korea was obligated
to import up to 51,000 tonnes of rice in 1995. That obligation has
steadily increased and this year, Korea is obligated to import up to
409,000 tonnes of rice this year alone. At the end of this year,
Korea's grace period will come to an end. Korea can no longer afford
to delay opening up the market.

The first two lines above and below the Korean and the Philippines flags say "The only two countries in the world that have not opened their rice markets are Korea and the Philippines."The circles and the text in the middle of those circles say "Rice production has fallen from 4,690,000 tonnes to 4,230,000 tonnes. Korea has had to increase its obligatory rice imports from 50,000 tonnes to 400,000 tonnes. An average Korean's rice consumption has fallen from 532 bowls per year to 336 bowls per year."The last line says, "How much longer will the taxpayers' money be spent to subsidize rice? How much longer will we be forced to import rice? It is time to compete with imported rice."Image Source

Despite having protected the
rice market much more and much longer than any other industry,
Korea's agriculture industry has barely survived. Despite continuous
large-scale investments, Korea's agriculture industry's
competitiveness remains at a standstill. Due to a decline in the
number of farming households, more and more people have begun to
abandon their farms. As a result, only senior citizens and
low-income families continue to live in rural areas, which threatens
to shrink Korea's agriculture industry even further. Although rice
production has increased somewhat, average income has fallen, which
has caused a great income disparity.

Opening up the rice
market will provide our agriculture market with new opportunities.
Korean agricultural products are popular in China. That is because
the Korean brand is considered a trustworthy brand by Chinese
consumers. Opening the rice market will not lead to imported rice
flooding the Korean market but rather an increase in our exports to
overseas markets. Now is the time to increase the rice industry's
competitiveness and to focus on the debate of raising
tariffs.

Korea's agricultural industry stands at a crossroad.
It can either crash as a declining industry tends to do or it can
find ways to become a competitive industry. Using competitiveness as
a springboard, it has to find the right direction in order to become
an advanced agricultural industry. It has to extricate itself from
all of its excessive protections and move away from its
land-intensive production methods in order to pursue more
capital-intensive production methods.

The Confederation of
Farmers Alliance that has long opposed the opening of the rice market
has already begun to engage in all-night sit-ins and other forms of
protests. Instead of engaging in unreasonable protests, they have to
embrace market principles and the entrepreneurial spirit. In order
to transform the industry into a competitive one, and to transform it
from one focused on 공자유전
(耕者有田),
which
is established in Article 121 of the Republic of Korea Constitution
which states that “the State shall endeavor to uphold the notion
that those who till the land will use the land,” to one that is
focused on 경자용전
(經者用田),
which is the notion that those who can manage the land can use the
land.
Furthermore, the regulations and restrictions on the agriculture
industry ought to be abolished.

Only
this effort can lead to an increase in new capital investment that is
needed to increase the industry's competitiveness and establish an
international business that can compete globally.

That large
businesses are always opposed to entering the agriculture industry in
Korea is worrisome. Dongbu Group, which had built a state-of-the-art
facilities in a tomato production facility but faced opposition from
farmers groups and had no choice but to discard millions of tomatoes.
Dongbu Group had even signed a contract to export domestically
produced tomatoes to Japan. However, the farmers and the farmers
groups opposed this. After having lost millions, Dongbu Group
withdrew from the tomato business.

Toyota, the symbol of
Japanese manufacturing, on the other hand, has built and is
strengthening their agricultural productivity. The agriculture
business is gaining strength to becoming a vital business in the
future.

Whenever a free trade agreement has been signed be it
with Chile, the United States, the European Union, ASEAN, Australia,
or Canada, the farmers have never failed to angrily protest. Yet
even with the importing of Chilean grapes, domestic grape production
has increased. The beef market has been opened but Korea's beef
industry has not weakened. It is the same with other agricultural
goods. The farmers have begun to improve their quality, scientific
methods, and have begun to become more competitive.

Although
competition and opening up markets can threaten domestic businesses
initially, it has in fact strengthened the domestic
industry.

Agricultural products have increased in value and
improved their income levels. People have to accept this new change
and farmers must stop thinking of themselves as farmers and instead
think of themselves as “farmakers” and “farmarkets.” Farmers
have to accept the entrepreneurial spirit that can only exist within
capitalism and only this can ensure the successful development of a
competitive agricultural industry.

Friday, July 25, 2014

Economics
can be a very dry subject to many people. In fact, when I first came
across the topic of economics while I was in high school, the only
thing I knew about the subject was that it
is a study about money that I don't have.

I
would have slept through the whole class in high school had it not
been for the fact that my economics teacher, Mrs. Charice Lai, was a
smoking hot woman who had the amazing ability to make lessons about
the Production Possibility Curve and the differences between
comparative and absolute advantages sound like she was reading from a
dirty romance novel.

Hence,
I paid very close attention in class and before I knew it, I was
majoring in economics in college. My other major was political
science. So what was it like majoring in both economics and
political science? Other than realizing that double majoring in the
social sciences during a world-wide economic slump was probably not
the best investment decision that I had ever made in my life, the
other lesson that I learned can be summed up by this quote from the
esteemed economist Thomas Sowell.

The
first lesson of economics is scarcity: there is never enough of
anything to fully satisfy all those who want it. The first lesson of
politics is to disregard the first lesson of economics.

As
regular readers of this blog will know, I do write a fair deal about
economics. And I plan to keep doing it. Mark Twain did say that
people should write what they know. But it is a very dry topic and I
don't have Charice Lai's curves or sultry voice.

However,
when I read a series of news articles recently about Finance
Minister Choi Kyung-hwan's
views about Korea's economy, its future, exchange rate policies,
taxes, and income distribution, I knew that I had to write about it.
Unfortunately, there is way too much to write in response to
everything he has said and done in the past month. My longest post
to date, “The
Philosophy of Snowpiercer”
was a thirty-minute read (yes, I timed it) but it was at least about
a fun movie. A single post that long about economics would bore most
everyone to tears. More realistically, it would remain unread.

So, the first decision that I made was that I am going to write this post as a series just like I did when I wrote about the “Are You All Right” Movement. The second decision that I made was that I am going to make this as relatable as possible by trying to incorporate anecdotes, jokes, analogies, etc.

However, before we can get to the fun part, we do have to slog through some of the boring parts that were in the news. If we don't, then you will have no idea where all of this rambling is coming from.

So here we go. This will mark the first of the series “Super Fun Economic Review” – Part 1: The Boring News Stuff Before We Dive Into the Fun Stuff.

(Of course it is a ridiculous title that is begging for clicks! Would you have clicked on the link if it had been “A Critique of Expansionist Fiscal and Monetary Policies?”)

Anyway,
with less than a week to go for the July 30th
by-elections, the ruling conservative Saenuri Party is predicted
to lose its majority
in the National Assembly. Considering the rapid-paced economic
announcements that have been coming out of the Blue House and the
Ministry of Strategy and Finance, it would seem that both President
Park and the Saenuri Party are desperately trying to stave off
defeat. And there is no other time that politicians pander more than
when they are truly desperate.

For
example, it was reported in an article
in The Korea Times that Saenuri Party lawmaker, Representative Kim
Moo-seong, said that the government ought to depreciate the value of
the Won. He said, “There is a Currency War going on in the world
right now and the Bank of Korea ought to come up with ways to adjust
the exchange rate. However, the Bank of Korea has not come up with
any measures. We have to depreciate the currency.” (This was
translated from the Korean text, which does not appear in the English
version.)

In
the same article, the newly appointed Finance Minister Choi
Kyung-hwan
said that there are too many corporations that are hoarding excessive
profits. In order to ensure that “more money goes to households,”
he said that he would push for tax breaks to provide
incentives for corporations to increase wages and dividends for small
investors. However, if those corporations that have surplus profits
build up internal savings without raising wages or dividends, the
government will then tax the “excess profits.”

Furthermore,
Minister Choi also said
that low growth, low inflation, and an excessive current account
surplus are signs that Korea may follow in the path of Japan at the
start of its so-called “lost two decades.”

Therefore,
in an attempt to avoid a much-feared long period of deflation that Japan
went through, it was just reported
today (July 25th
2014) that the Korean government plans to inject the economy with a
₩41
trillion (US$39.8 billion) stimulus package to revive the sagging
economy. Minister Choi also said, “The government plans to use
expansionary measures until the economy shows clear signs of
recovery.”

As
further measures, the government plans to expand tax deductions for
people who use debit cards to make purchases from 30 percent to 40
percent. The government also plans to increase tax deductions for
households that earn ₩70 million in annual salaries or less that
plan to purchase homes and also plans to increase government-provided
home mortgages.

So,
that's the background information that you need to know for now.
Stay tuned for the next installment that will deal with the topic of
currency depreciation.

Monday, July 21, 2014

With
the 2014 Asian Games set to begin in Incheon in September,
the North Koreans initially proposed to send up to 150 cheerleaders
to the games. At the time, the total cost of hosting the
cheerleaders and the North Korean athletes were estimated to be
around ₩1.5
billion (US$1.45 million).

Since
then, however, the North Koreans have declared that they would send
up to 350
athletes and 350 cheerleaders. Of course, this does not count
the bodyguards and the political minders that the North Koreans will
most likely send to ensure that none of their athletes or
cheerleaders gets any ideas about defecting.

If
South Korea ends up paying for the North Korean delegation as it has
in the past during the days of the so-called Sunshine
Policy, then I have a feeling that it would cost more than the
aforementioned ₩1.5 billion.

During
the negotiations about how many delegates the North Korean government
was planning to send (Does it strike anyone else that it is ludicrous
for the meeting to have taken place at all?), the South Korean
government, which seems to have grown something that resembles a
backbone, did not play the game that the North Koreans wanted. A
South Korean government official reportedly said:

At
past international sporting events, it was customary to provide all
accommodation free of charge for the North Koreans, but we decided to
adhere to international practice this time. And under Olympic Council
of Asia regulations, each country is responsible for the expenses
incurred by its athletes and cheering squads, although accommodation
subsidies are provided for underdeveloped countries that are sending
a small group of athletes.

When
the North Koreans were told that they were not going to get a free
lunch and that their flags were going to be the same size as everyone
else, as per their typical behavior, the North Koreans huffed and
they puffed and said something about how
South Korea displayed
an “improper attitude” to the talks.

The
fact that the North Koreans even brought up these ridiculous demands
should not come as a surprise to anyone.

North
Korea is a nation of thugs
– a country that was founded on the principle of taking everything
from everyone and giving it to the Supreme Leader. What is money to
the North Koreans? To everyone else who lives in capitalist(ish)
economies, money is a tool of exchange – it is what people use to
trade with others.

And
we have to keep in mind that unless forced to do so, no one in the
world trades down. People always trade up. What that means is
before I decide to pay for a product, I will always make sure that
the product will be of higher value to me than the money that I would
give up in exchange for the product. When we accept money in
payment for our effort, we do so only on the conviction that we will
exchange it for the product of the effort of others. In other words,
people trade value for value. That is what money is used for.

And
where does our effort, the goods that we produce, come from? They
don't magically appear out of thin air. We have to use our minds to
create something that is worth selling. If we didn't use our minds,
we wouldn't be able to create a single thing.

In
sum, money is the tool that we use to exchange with each other the
efforts of our minds.

That
is why money is sacred. That is why we hate those who steal and
commit fraud. Thieves, through no merit of their own with the
exception of thuggery and skulduggery, take from the rest of us what
we have rightfully earned by the sweat of our brow. That is why in a
civilized society, thieves are shamed and punished (or at least ought to be).

They
have no rational minds to speak of – only power lust and the desire
for unearned greatness. They wouldn't even know how to begin to
think of something as being sacred. They are unthinking brutes, and
the only good thing that they could ever possibly do for themselves
and the rest of the world is to commit mass suicide.

However,
now that I think about it, I think I may have been far too charitable
to people who live south of the DMZ when I said that everyone
who lives in capitalist(ish) economies knows that money is a tool of
exchange. There are clearly some people who not only lack that
knowledge, but also lack anything that resembles a brain altogether.

Case
in point,
The
Korea Times
published an editorial
about how Seoul should have been the
one to initiate this unbelievable fiasco by having
invited North Korea to participate in a regional sports festival in
South Korea and offering to pay the cost. The
editorial goes on to say that
Seoul needs to be more magnanimous and tolerant, no longer citing
“international standards” or “popular sentiment.”

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About Me

My name is John Lee and I am currently the editor and writer behind the independently-run blog, “The Korean Foreigner.”

Recently, I have also begun to work as a freelance copy editor for Freedom Factory. Here, with permission from Freedom Factory, I shall post English translations of Freedom Factory’s weekly newsletter “Freedom Voice.”